What to do if you have been denied a loan

(InvestigateTV) — A new Bankrate survey found that half of Americans who have applied for a loan since the Fed started raising interest rates in 2022 have been denied.

The Federal Reserve began raising rates in March of 2022 to help slow inflation, and one result was that lending restrictions were tightened.

Sarah Foster with Bankrate said lending options have decreased for many Americans.

“We saw that half of applicants have been denied for a loan or financial product that they’ve applied for since the Feds began raising interest rates in March 2022,” Foster explained. “And then we also saw that about one in five Americans also say here that their access to credit has gotten more difficult since the Feds began raising interest rates.”

She said the denials span different types of financial products, though credit card application denials topped the list.

But the increase in denials also involved mortgage applications. Foster explained that a $500,000 home would be about 62% more expensive a month than it was when mortgage rates were at that record low in 2021.

Foster said when financing costs rise that quickly, it ultimately requires that borrowers have more income or documentation and a better credit history.

“I think this really underscores the importance of Americans taking steps right now to bolster their credit scores so they can not only get approved for the loan that they’re applying for, but also get the best interest rate possible that the lender is offering,” she said.

According to Foster, a better credit score could make a difference between one or two percentage points worth of an interest rate.

Foster reminded consumers that lenders are required to disclose why an application was rejected. Most of the time they send the report within ten business days of a rejection.

She recommended that people look at that report to check for mistakes and to see what they might be able to fix or change before applying again.

If their credit score is the snag, they can work to change it, but bolstering your credit score is often easier said than done and it’s not a quick process.